All Forum Posts by: Simcha Davidman

@Jason Grimm you definitely have options. What percent is the $100-150k?

Based on your assessment is it worth it? Is there a value add component here, or is it being purchased below market value? This is really important here because you need to (re)finance the property within 24 months to get them out - you didn't state what the LTV is, but if you pay too much for it up front, you will not be able to get a large enough loan to pay them off later.

But yes, if you think this is a deal, follow through! There are a lot of options. If you have strong convictions about this purchase, I'd recommend trying to find more debt (hml, preferred/mezzanine, etc) even if it costs you a bit more, because you'll end up with a larger piece after you refinance and get rid of these pieces of the capital stack. But again, this is assuming you will be able to refi at a high enough value and LTV to do this.

Good luck!

@Jase Machado I think you nailed it - you need to really hammer down what your goals are. While you continue your education and networking, you can then you can start to shift your focus toward the things that will get you to where you want to be fastest.

I'm pretty sure there are podcasts with people living in big, expensive cities - and making it work. It's not going to be by buying $50k houses that hit the 2% rule, but people are making money in real estate everywhere, literally.

On the other hand, you may decide that buying at a distance is better for you. One benefit that this has is you're sort of forced to set it up as more of a business than if it was only a few minutes away from you. Between your family and job, I assume you're not looking for an additional job of landlording. So to the extent that this is accurate, make sure it fits with your goals, too.

There are no definitive guidelines because there are too many ways to skin the cat, and too many goals you may have while doing it. If your ultimate goal is to buy a mall or an office building, don't buy a single family house or an apartment building. There are also those who espouse the view that if you want to get into multifamily, you shouldn't even buy single family, if you can avoid it - because they're different investments and different businesses.

For example, if you want to own apartments (or anything large), an option is to take your equity (looks like you can probably get $150-200k) and just go do it. You can go a distance and go the distance - buy a million dollar property (thereabout) with 15-25 units and you have scale. Or, you can find a partner who is interested in similar things (preferably that has more experience than you) and can do something similar. Now you're looking at a combined $300-400k equity and you can buy a nice size building/complex. I'm not recommending this, but as you stated, you need to figure your goals and then go after them - and not some other goals.

Best of luck!!!

@Matt Moylan interesting.

Is there a deductible on the buydown policy? But then they pay the whole deductible of the primary?

How does the cost of the buydown policy compare to the cost of just paying for a lower deductible?

@Jase Machado you're probably best off financially with a refi, but that's not necessarily best for you. You need to take nonfinancial things into account, too.

You can also look into a Home Equity Loan, which is a second mortgage. You could get a fixed long term loan with a relatively low rate (I think usually lower than the HELOC rates), and it wouldn't effect your primary mortgage. Your rate would not be as favorable, though, because this new loan would be a second position lien.

In terms of the second paragraph, I'm not sure I follow. Regarding the three loans, do you mean (1) your primary loan, (2) the heloc for the down payment on the investment property and (3) the primary mortgage on the investment property? If so, then yes, it seems like you got that right.

Good luck!

@Keith Mudiappa Welcome to BP!

1) You probably don't have to worry about setting up a business entity. Work on getting that first deal, and make sure you have insurance. I'm going to assume that you don't have millions in assets to protect at this point, so insurance should be more than enough to protect you. (This is NOT legal advice.)

2) I'm not sure I understand your question. If you have a rental property, why wouldn't it be considered part of your rental portfolio? Or better, why does it matter?

3) I assume you're referring to a loan preapproval. This is not really worth anything, until you have an actual property and apply for a loan. The bank can decide to lend you a totally different amount, or it can decide not to lend to you at all. It comes down to what you're comfortable with (assuming a bank will lend that amount to you). But you have to figure what your income is, what your expenses are, and what your expenses will be, including the debt service (loan payment). Are you ok with all of that? Does it leave you with enough cash reserves? Those are some things you need to address to figure out what you're comfortable with in terms of loan size.

Best of luck to you!

@Misty Edens welcome to BP! I'm sorry you find yourself in your current situation - it does not sound fun.

If you don't pay your rent, she should be able to evict you legally, notwithstanding that she may also be in violation of the agreement.

Speaking of which, I assume you have some sort of contract that says what her duties are. Does it say in there that she must continue to pay the property taxes? Does it say in there that she represents/warrants to you that there are no liens on the property? Do you know when the IRS filed the lien against it?

Finally, did you do any sort of title/lien search on the property before you entered into the agreement? Did you give a downpayment, or are you just making monthly rent payments?

Disclaimer - This is not legal advice and we do not have an attorney-client relationship.

@Alejandra Macias welcome to BP!

Was there a written document regarding their investment? If there was any sort of contract, I'd expect it to state what the contribution was. If it was a loan, I'd assume that this was a repayment of a loan, which is generally a non-taxable event. If it was an equity investment, I'd assume that this is a withdrawal of capital, also a non-taxable event.

On the other hand, was this angel investor essentially a buyout of a portion of their equity? In that case, then I think there would be a capital gain if they sold their shares at a profit.

Disclaimer - I am not an accountant, and I am not providing you with legal advice. You may want to seek a professional opinion.

Good luck!

@Account Closed welcome to BP!

If you have $30k to work with, you'd be best investing in some way where you can recycle that and get it back as fast as possible via refi.

Alternatively, use the $30k to buy something to start building your track record, and then approach family/friends to partner up with. If someone else puts up (most of) the money, you don't need $30k every deal and you still build your portfolio/equity/cashflow.

Good luck!

@Daniel Quintana welcome to BP and good luck!

I think your 13-15% total for repairs and capex should be a good estimate. A couple things to consider:

Does your repairs number include turning a unit ("make ready")?

Are you responsible for trash, landscaping and pest control? If so, are you including that in your R&M? It's probably a better idea to separate them out.

But it is definitely a fine balance between being too conservative and killing your deals and not being conservative enough.

Best of luck!

@April Oswalt welcome to BP!

If you know the bank that owns it, I'd contact every person I can find that works there until they get me to the right person. Obviously, if you know someone who knows someone at the bank, that would help, too.

Good luck! Let us know what happens.